US blocks exports from Chinese mobile phone maker ZTE

Global Business

A man, seen on the screen of a smart phone, takes photographs of a miniature city set at the Chinese ZTE stand during the Mobile World Congress Wireless show in Barcelona, Spain, Tuesday, Feb. 23, 2016. (AP Photo/Francisco Seco)

A U.S. Commerce Department investigation found that Chinese cell phone maker ZTE “has reexported controlled items to sanctioned countries contrary to United States law” by selling U.S. telecommunications parts to Iran — in violation of U.S. sanctions.

ZTE makes phones for:

* Cricket
* Boostmobile
* Orange

The company has been placed on the Commerce Department’s “Entity List” which makes it subject to specific license requirements for the export, reexport and/or transfer of specified items.

The restrictions require American suppliers to apply for an additional export license before shipping their parts to ZTE. It’s unlikely that those license requests will be approved.

The U.S. Commerce Department also released internal ZTE documents that the government claims outline how the company allegedly planned to circumvent U.S. trade sanctions on Iran

US blocks exports from Chinese mobile phone maker ZTE

US blocks exports from Chinese mobile phone maker ZTE

A U.S. Commerce Department investigation found that Chinese cell phone maker ZTE “has reexported controlled items to sanctioned countries contrary to United States law” by selling U.S. telecommunications parts to Iran — in violation of U.S. sanctions.

View the documents in English and Chinese below.

“ZTE has been working with relevant U.S. government departments on investigations, maintaining constant communication with relevant departments and is committed to fully address and resolve any concerns,” the company wrote in a statement.

“As a responsible business, ZTE strives to ensure all operational activities adhere to international trade practices and the laws and regulations of host countries.”

Enrico Camarinelli, analyst at the Aite Group told CCTV America the ruling will hurt major U.S. suppliers the most. Consumers, he said, are unlikely to feel any long-term impact.

“The only impact on consumers could be a potential shortage of parts, but all these suppliers are replaceable,” he said.

Sino-U.S. Trade Friction

China’s Foreign Ministry weighed in on the decision Monday.

“China is always opposed to the U.S. citing domestic laws to place sanctions on Chinese enterprises,” Foreign Ministry spokesperson, Hong Lei told reporters in Beijing. “We hope the U.S. stops this erroneous action and avoids damaging Sino-U.S. trade cooperation and bilateral relations.”

According to Bloomberg Analytics, Avnet, Qualcomm, and Microsoft are among the top U.S. suppliers to ZTE for its telecommunications equipment.

Camarinelli said with so much U.S. business on the line, the U.S. Commerce Department could have made a choice to work out a deal with ZTE prior to issuing this ruling.

“On one hand, this can be about making sure China follows the rules (of global trade), but there are more diplomatic ways to do this,” Camarinelli said.

The ruling is likely to incentivize Chinese companies to develop their own Chinese supply chain to avoid the liability associated from relying on American suppliers down the road, he added.